34 (The Assignment Direct materials and manufacturing labor variances, solving unknowns, (CPA, adapted) On May 1, 2012, Bovar Company began the manufacture of a new paging machine known as Dandy. The _ company installed a standard costing system to account for Manufacturing costs. The standard costs for a unit of Dandy follow: Direct materials (3 Ib. at $§ per ib.) 15.00 Direct manufacturing labor (1/2 hour at $20 per hour) 10.00 Manufacturing overhead (75% of direct manufacturing labor costs) 0 The following data were obtained from Bovar’s records for the month of May: nues ‘Accounts payable cantral (for May's purchases of direct materials) Direct materials price variance $3,250 Direct materials efficiency variance 2,500 Direct manufacturing labor price variance 1,900 Direct manufacturing labor efficiency variance 2,000 ~ Rétual productian in May was 4,000 units of Dandy, and actual sales in May were 2,500 units. The amount shown for direct materials price variance applies to materials purchased during May. There was no beginning inventory of materials an May 1, 2012. Compute each of the following items for Bovar lor the month of May. Show your computations. 1. Standard direct manufacturing labor-hours alowed for actual output produced 2 Actual direct manulacturing labor-hours worked 2. Actual direct manufacturing labor wage rete 4. Standard quantity of direct materials allowed lin pounds) 5. Acfual quantiy of direct materials used (in pounds) ~ 6 Actual quantity of direct materials purchased (in pounds) 1. Actual direct materials price per poundActa cous Incurred (Actual Input ‘Quanticy Actual Input Quantity for Actunl Output _ x Actual Price * Budgeted Price x Budgeted Price) Diccet Mamufseturing 1.900» sty (1.900 $308) (4.000" » 0.5* » $20) Labor $39,900 38,000 ‘540.000 ents are designated by an asterisk, + 7 Flextbte Budget | (Budgeted Input Quantity Allowed $2,000 F1 Eifzieney varias Usage Pet, 1300" $5.25) TRoGO» S85) TES00* SF) 4.000" « 34 = 56) — Matenaly —""'Seu.asoe 365,000 562.500 $60,000 q 83.2500" $2,500 Ut ive oriance Tiicieney vain 1, 4,000 units « 0.5 hours/unit = 2,000 hours 2. Flexible budget ~ Efficiency variance = $40,000 ~ $2,000 Actual di = $38,000 + Price varia Actual rate ~ Actual cost > Actual hours 38,000 ‘manuf. labor hours = $38,000 « Budgeted price of S20/hour ~'1,900 hours - - $1,900 = $39,900. the actual direct manuf. labor cost 539.000 ~ 1.900 hours ~ $21/hour (rounded) 4. Standard quantity of direct materials 4,000 units « 3 pounds/unit ~ 12.000 pounds 5. Flexible budget + Dir, malls. effey. var. Actual quantity of dir. mails. used ~ $62. > $62,500 > S5i1h ~ 1 60.000 + $2,500 - $62,500 0 sted prive per Ib 6.- Actual cost of direct materials, $8,250 ~ Price variance, $3250 « $65,000 Actual quantity of direct materials purchased ~ $65,000 + Budgeted price, $5/Ib ~ 13.000 Ibs. 7. Actual diet materials price ~ $68.250 + 13,000 Ibs ~$5.25 per Ib.Review 1) Better P per unit, ae ts Inc. planned to use $43 of material pr unit but actually used $32 of material Planned to make 1,510 units but actually made 1,340 unit. Reetle budeet amount for materials is B) $64,930, C) $48,320 D) $42,880 “Answer: A a Explanation: 1,340 units « $43 = $57,620 2) Better Products Inc. planned to use $36 of material per unit but actually used $34 of material -Per unit, and planned to make 1,520 units but actually made 1,310 units. The flexible-budget variance for materials is - ‘A) $3,040 favorable a B) $3,040 unfavorable _C) $2,620 unfavorable 1D) $2,620 favorable Answer: D Explanation: ($94 ~ $36) * 1,310 =$2,620 F 3) Better Products Inc. planned to use $40 of material per unit but actually used $30 of material ~per unit, and planined to make 1,560 units but actually made 1,310 units, ‘The sales-volume variance for materials is. A) $10,000 favorable - B) $10,000 unfavorable “C) $7,500 unfavorable D) $7,500 favorable Answer: A -Explanation: (1,310 ~ 1,560) « $40 = $10,000 F4) The actual information pertains to the month of June. Aaa part of the budgeting process, Great Cabinets Company developed the following static budget for June. Great Cabinets loin the process of preparing the flexible budget and understanding the results, Actual Remults Sates volume (in units) zoo Sales revenues $1,000,000 Variable costs 40.040 Contribution margin 520,000 Fixed costs 276200 Operating profit $243,800 The Mexible budget will report ay$303,420 8) $270,600 ©) $530,200 D) $246,000 Answer: B Flexible Sta s s $ s Se Explanation: $270,600, given in the static budget | IE for the fixed costs. tie Budget 22.000 $1,100,000, 330,200 569,800 270,600 $299,200 5) Classic Products Company manufactures colonial style desks, Some of the ‘company's data was misplaced. Use the following information to replace the lost date. Actual | Flexible Budget | Flexible | Sales-Volume | Static Results_| Variances | Budget_| Variances | Budget Units sold | 490,01 490,01 $48,354 Revenues $187,95 $4,900 FH ay $6,260 U B \Variable kosts © $850 U|_ $72.07 $10,400 _$82,47d [Fixed costs | $36,67 33,7007 $40.37 qs40374 atiny fneome. 378,36 (2) __$70,61 © Pe What dire the actual variable costs (C)? A) $71,220 B) $72,920 ©) $72,070 D) $82,470 Answer: B Explanation: $72,070 + $850 = $72,920 Complete the other unknowns yourself6) Standard m: vaterial cost per kg of raw material is $650, Standard material allowed per unit is What is the standard cost Kg. Actual mater per output unit? il used per units 6.00 Kg, Actual cost per kg is $6.00 A) $30.00 BY $36.00 C) $32.50 D) $39.00 Answer: C Explanation: Standard cost per ot allowed per unit= cesnes hg Ce ? Standard material cost per kg x standard moterial 7 ; » A eee fticiency variance for direct manufacturing labor indicates tut_— ) lower wage rate than planned was paid for direct labor 8) a higher wage rate than planned was pad for direct labor Tabor hours were used during production than planned for actual C) less direct manufacturing output 1) more direct manufacturing labor-hours were used during production than planned for acl ‘output Answer: C In 2017, All developed standard costs for direct material and direct labo ir major products the 10-gallon plastic (8) Heavy Products, Inc. tandard costs for ane of thei ‘estimated the following s container. Direct materials 0.70 pounds ‘$70 per pound Direct labor 0.10 hours $35 per hour oduced and sold 25,000 containers using 23,000 pounds of direct ‘direct manufacturing labor-hours at an Heavy Products pt pound of $75 nd 17/500 average cost per £595.75 per hour. “During June, ‘materials at a9 average WaBe Of “The direct material price variance during June is. . | ay $125,000 unfavorable #5) $500,000 favorable ©) $500,000 vafovorable D) $13,125 favorable = 23,000 » ($75 ~ $70) = $115,000 U - Answer: A | Explanation: Direct material price variance 5 mplete the other variances for direct mat rial and direct labor yourselffollowing flexible budget for August and Handley Manufacturing Company has prepared the following flexible b nthe prove of interpreting ihe variances F denotes a favorable variance and U denotes an unfavorable variance. Material A Material B Direct manufacturing labor ‘The actual amount spent for Material B was A) $58,200 8) $59,800 ©) $61,000 1D) $62,200 Answer: B Flexible Budget $45,000 61,000 83,000 Variances. Price Efficiency $1,100 $3,200 ‘800U 2,000F 600U 2,500F Explanation: $61,000 + $800 U - $2,000 F = $59,800 Flexible Material A $27,000 Material B 32,000 ~ Material C 46,000 The actual amount spent for Materi ee Pe aterial A was B) $26,200 ©) $27,800 D) $23,800 Answer: C Explanation: Actual amount spent for Material A = $27,000 + $2,000 U~ $1,200 F Variances Price ici $2,000U $1,200F 400F 700U \,800U 2,300F $27,800 Crannad with CamQranner ——hes furniture 4 , 8. A oe x following? Direct Materials standard 2 en rect manufacturing labor standard, 13h: ~Duiting the third 1 Marter, th cae q € Company made 1, f wood i -500 kits and are yards o ' Direct labor totaled 2,100 hours forsaerge oe Se Yards at $13.50 per yard ‘OMFS at $20.00 per hour Required: . :2 Compute the direct Materials price and. efficiency Variances for the quartet. arter- b. Compute the direct manufacturing labor price and efficiency variances for the swer, a. Direct materials variances: Actual unit cost = $42,600/3,150 square yards = $13.33 per square yard Price variance = 3,150 * ($13.50 - $13.33) 2 = $535.50 favorable ji iance = $13.50» [3,150 -(1,500 * 2H] Efficiency variance = $2,025 unfavorable -b, Direct manufacturing labor variances: + * = $46,150/2,100 Actual labor rate e198 per hour £2,100 » (521.98 - $20.00) Price variance =$4,150 unfavorable , - 12 §20.00 » (2,100 = (1,500 * 1.5) Efficiency variance? 7 © ogo favorable12) The folowing dala forthe Prendler Company pertain to the production of 800 ums during August. Direct Materials (all materials purchased were used): Slandard cost: $4.80 per pound of urn. Total actual cost: $4,480, Standard cost allowed for units produced was $4,800, ~ Materials efficiency variance was $96 unfavorable. Direct Manufacturing Labor: Standard cost is2 ums per hour at $19.20 per hour. Actual cost per hour was $19.60, Labor efficiency variance was $288 favorable, Required: a. What is standard direct material amount per urn? b. What is the direct material price variance? © Whats the total actual cost of direct manufacturing labor? 4. Answer: a.” Standard cost per um = $4,800 / 800 $6.00 per urn Standard number of pounds per urn = $6.00 / $4.80 ‘What is the labor price variance for direct manufacturing labor? = 1.25 pound per urn b. Materials price variance = S416 favorable © Total standard labor cost of actual hours = ((800/2) » $19.2) ~ $288 favorable $7,392 = Total variance - efficiency variance = (64,480 ~ $4,800) ~ $96 unfavorable “Actual hours = $7,392/19.2 = 385 hours Total actual costs d. Labor price variance =$7,546 ~ $7,392 $154 unfavorable13) A variance iy A) the difference beim: ®) the standard units eeN actual fixe ed 7 ©) the difference ‘St Per unit and standard variable cost per unit o inputs for one out D) the ditfor Wween’an actual result ny rence re Answers ¢.” DetWeen actual vary itd 2 budgeted performance Variable cust pe , Per unit and standard fixed cost per unit ‘Answer @ "7 margin is more than the actual amount 15) At the st level offen See budget Period, management will have made most decisions regarding the overhead costs asa to be incurred. -16)-Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit? A) Budgeted output allowed per input unit x Budgeted variable overhead cost rate per input unit B) Budgeted input allowed per output unit + Budgeted variable overhead cost rate per input unit C) Budgeted output allowed per input unit + Budgeted variable overhead cost rate per input unit -D) Budgeted input allowed per output unit x Budgeted variable overhead cost rate per input unit Answer: D 717) Really Great Corporation manufactures industrial-sized landscaping trailers and uses sed machine-hours to allocate variable manufacturing overhead. The following information budge pertains to the company’s manufacturing overhead data: . Budgeted output units 40,000 units Budgeted machine-hours 10,000 hours Budgeted voriable manufacturing overhead costs for 40,000 units ‘$310,000 ~Actual output unils produced . 36,500 units tual machine-hours used 14,600 hours 7 wverhcad costs $350,400 “actual variable manufacturing 0 What is the budgeted variable overhead costrate per output unit? iatis the A) $9.60 B) $12.40 \$7-75, -D) 331.00 Answer: C ; dla a jon: Machine hour per unit = 10) epee re machine hour = $310,000 + 10,000 = $31.00 udgeted cost per unit» $31.00 * 0.25 = $7.7518) The variable overhead spending variance measures the difference between - multiplied by the actual quantity of variable overhead cost-allocation base ‘used, AA) the actual variable averhwad cost per unit and the bud, lgeted variable overhead cost per unit Othe standard variable overhead cost rte and the budgeted variable overlens cost rate . 5) the actual variable overhead cost per unit and the budgeted fixed overhen cost per unit D)the actual quantity per unit and the budgeted quantity per unit Answer: A '5) Majestic Corporation manufactures wheel barrows and uses budgeted machine hours to allocate viriable manufacturing overhead. The following informatioe relates to the: company’s - manufacturing overhead data Budgeted output units 43,500 units . Budgeted machine-hours ; 17,400 hours Budgeted variable manufacturing ovethead costs for 43,500 units $382,800 Actual output units produced 45,500 units Actual machine-hours used 14,500 hours _ ‘Actual variable manufacturing overhead costs $435,709 What isthe flexible-budget variance for variable ‘manufacturing overhead? : A) $35,309 unfavorable - - 8) $52,909 unfavorable ©) $35,309 favorable D) $52,909 favorable Answers A * Budgeted machine hours per unit= 17.400 = 43,500 = 0.4 - chine hours alowed for 45,500 units = 45,500 0.4 «18.200 Budgeted variable ovethead rate per machine hour « $382,800 + 17,400 = $22.00 Flexible-budget amount = 18,200 «$22 00 = $400,400 Flexible-budget variance = $435,709 ~ $400,400 = $33,309 unfavorable 20) Lazy Guy Corporation manufactured 6,000 chairs during June. The following variable overhead data relates to june: Budgeted variable overhead cost per unit $10.00 Actual variable manufacturing overhead cost $52,800 - Flexible-budget amount for variable manufacturing overhead $46,900 Variable manufacturing overhead efficiency varianve What is the variable overhead spending variance? A) $5,110 favorable . 8B) $5,900 favorable ©) $5,900 unfavorable D) $5,110 unfavorable Answer: D ; Explanation: Variable overhead fexible-budget variance =$52,800 - $46,900 = $5,900 (U) Yoriable overhead spending variance =$5,800(U) - $790 (U) = $8,110 ©) Solve 7-37 én your textbook yourself - Good Luck $790 unfavorable Cnannad with CamCnannar